Samsung Electronics (005930.KS) is expected to post a more than four-fold rise in quarterly profit on Tuesday on improving chip demand, but the pace of its recovery is weakening as it is slow to cash in. of artificial intelligence. boom.
Operating profits at Samsung, the world’s top maker of memory chips, smartphones and televisions, likely amounted to 10.33 trillion won ($7.67 billion) in the quarter ended Sept. 30, according to an average of 29 analysts. of LSEG SmartEstimate, weighted toward those that are most consistently accurate.
That’s a jump from 2.43 trillion won a year earlier, but little changed from the 10.44 trillion won reported in the previous quarter.
The global semiconductor market has been recovering from last year’s slowdown, driven by chips used in AI servers, but the recovery in demand for conventional chips used in smartphones and PCs is slowing, analysts said.
The South Korean company has been struggling to catch up with smaller rivals SK Hynix (000660.KS) and Micron (MU.O), in a race to supply high-end artificial intelligence chips to Nvidia (NVDA.O), while facing increasing competition from Chinese rivals for basic chips.
Samsung’s core chip division is expected to achieve an operating profit of 5.5 trillion won from a year ago, but this will be 15 percent less than the previous quarter, also hurt because Samsung has set aside provisions for bonuses, according to estimates from 10 analysts compiled by Reuters.
Samsung’s late response to the higher-margin AI chip market and its greater exposure to China and traditional mobile chips than its peers have made it more vulnerable to geopolitical risks and lackluster demand, analysts say.
“Samsung is more likely to lose the title of number one DRAM supplier should the commodity DRAM market weaken,” Macquarie Equity Research analyst Daniel Kim said in a recent note, referring to memory chips. Dynamic random access memory (DRAM) are widely used in computers and smartphones.
“That is, the oversupply of conventional DRAM will likely hurt Samsung much more than SK Hynix.”
The pessimistic forecast comes as Micron last month forecast first-quarter results above Wall Street estimates and reported the highest quarterly revenue in more than a decade thanks to growing demand for its memory chips used in the computing industry. artificial intelligence.
Analysts estimated that Samsung’s non-memory chip operation (chip design and contract manufacturing) also continued to post losses in the third quarter as it struggles to compete with dominant leader TSMC (2330.TW), which has Apple (AAPL.O) and Nvidia among its clients.
Samsung is cutting up to 30 percent of its overseas staff in some divisions, Reuters reported in September, underscoring the challenges for the company.
Sales of premium foldable phones are also likely to disappoint, hurting profits at the company, which faces increasing competition from Chinese rivals such as Huawei, analysts said. Its mobile phone and network businesses posted an operating profit of 2.6 trillion won in the third quarter, down a fifth from a year earlier, according to estimates from 10 analysts compiled by Reuters.
Samsung Electronics shares are down 23 percent so far this year, lagging SK Hynix’s 23 percent rise.
The South Korean firm will announce its preliminary third-quarter earnings on Tuesday before reporting full numbers later this month.
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